<PAGE>
RULE NO. 424(b)(5)
REGISTRATION NO. 33-65135
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED JANUARY 19, 1996)
[LOGO]
$45,000,000
MERRILL LYNCH & CO., INC.
AMEX HONG KONG 30 INDEX*
EQUITY PARTICIPATION NOTES DUE FEBRUARY 16, 1999
The AMEX Hong Kong 30 Index Equity Participation Notes due February 16, 1999
(the "Notes") are debt securities of Merrill Lynch & Co., Inc. (the
"Company"), which are being issued in denominations of $1,000 and integral
multiples thereof, will bear no periodic payments of interest and will mature
on February 16, 1999. At maturity, a beneficial owner of a Note will be
entitled to receive, with respect to each Note, the principal amount thereof
plus an interest payment (the "Supplemental Redemption Amount") based on the
percentage increase, if any, in the AMEX Hong Kong 30 Index (the "Index") over
the Benchmark Index Value. The Supplemental Redemption Amount will in no event
be less than zero or more than $1,000 per $1,000 principal amount of Notes,
representing a maximum annualized rate of return of 24.28% compounded semi-
annually over a term of three years. The Notes are not redeemable or callable
by the Company prior to maturity. While at maturity a beneficial owner of a
Note will receive the principal amount of such Note plus the Supplemental
Redemption Amount, if any, there will be no other payment of interest,
periodic or otherwise.
The Supplemental Redemption Amount payable with respect to a Note at
maturity will equal the product of (A) the principal amount of the applicable
Note, and (B) the percentage increase from the Benchmark Index Value to the
Ending Index Value. The Benchmark Index Value equals 664.83 and was determined
as described herein. The closing value of the Index on the date of this
Prospectus Supplement was 579.79, and the Benchmark Index Value exceeds such
closing value by 14.67%. The Ending Index Value, as more particularly
described herein, will be the average (arithmetic mean) of the closing values
of the Index on certain days, or, if certain events occur, the closing value
of the Index on a single day prior to the maturity of the Notes.
FOR INFORMATION AS TO THE CALCULATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
WHICH WILL BE PAID AT MATURITY, THE CALCULATION AND THE COMPOSITION OF THE
INDEX, AND CERTAIN TAX CONSEQUENCES TO BENEFICIAL OWNERS OF THE NOTES, SEE
"DESCRIPTION OF NOTES", "THE INDEX", AND "CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSIDERATIONS", RESPECTIVELY, IN THIS PROSPECTUS SUPPLEMENT. FOR OTHER
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK
FACTORS" BEGINNING ON PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT.
Ownership of the Notes will be maintained in book-entry form by or through
the Depository (as hereinafter defined). Beneficial owners of the Notes will
not have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein.
The Notes have been approved for listing on the American Stock Exchange (the
"AMEX") under the symbol "HKN.A", subject to official notice of issuance.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.............................. 100% 2.25% 97.75%
- --------------------------------------------------------------------------------
Total................................. $45,000,000 $1,012,500 $43,987,500
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The "Price to Public" and "Underwriting Discount" for any single
transaction to purchase $1,000,000 to $10,000,000 principal amount of
Notes will be 98.5% per Note and .75% per Note, respectively, and the
"Price to Public" and "Underwriting Discount" for any single transaction
to purchase in excess of $10,000,000 principal amount of Notes will be 98%
per Note and .25% per Note, respectively.
(2) Before deduction of expenses payable by the Company.
The Notes are offered by the Underwriter, subject to prior sale, when, as,
and if issued by the Company and accepted by the Underwriter and subject to
certain other conditions. The Underwriter reserves the right to reject orders
in whole or in part. It is expected that delivery of the Notes will be made in
New York, New York on or about February 7, 1996.
This Prospectus Supplement and the accompanying Prospectus may be used by
the Underwriter in connection with offers and sales related to market-making
transactions in the Notes. The Underwriter may act as principal or agent in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale.
---------------
MERRILL LYNCH & CO.
---------------
The date of this Prospectus Supplement is February 2, 1996.
*The use and reference to the term "AMEX Hong Kong 30 Index" herein has been
consented to by the American Stock Exchange.
The "AMEX Hong Kong 30 Index" is a service mark of the American Stock
Exchange.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
----------------
The Commissioner of Insurance of The State of North Carolina has not approved
or disapproved the offering of the Notes made hereby nor has the Commissioner
passed upon the accuracy or adequacy of this Prospectus Supplement or
Prospectus.
S-2
<PAGE>
SUMMARY
"The following summary does not purport to be complete and is qualified in its
entirety by the more detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus".
Issuer...................... Merrill Lynch & Co., Inc.
Notes Offered............... $45,000,000 of Equity Participation Notes due
February 16, 1999. The Notes are to be issued as
a series of Senior Debt Securities under the
Chemical Indenture described herein.
Listing..................... The Notes have been approved for listing on the
American Stock Exchange under the symbol "HKN.A",
subject to official notice of issuance.
Denominations............... $1,000 and integral multiples thereof.
Maturity.................... February 16, 1999.
Payment at Maturity......... At maturity, a beneficial owner of a Note will be
entitled to receive (i) the principal amount
thereof and (ii) the Supplemental Redemption
Amount equal to:
<TABLE>
<S> <C>
Ending Index Value-Benchmark Index Value
Principal Amount X ----------------------------------------
Benchmark Index Value
</TABLE>
provided, however, that in no event will the
Supplemental Redemption Amount be less than zero
or more than $1,000 per $1,000 principal amount
of Notes. The Benchmark Index Value equals 664.83
and was determined as described herein. The
closing value of the Index on the date of this
Prospectus Supplement was 579.79 and the
Benchmark Index Value exceeds such closing value
by 14.67%. The Ending Index Value will equal the
average (arithmetic mean) of the closing value of
the Index on certain days prior to the maturity
of the Notes, or, if Market Disruption Events
occur on certain days, then the Ending Index
Value will equal the closing value of the Index
on a single day.
Index....................... The AMEX Hong Kong 30 Index (the "Index") is a
capitalization-weighted stock index designed,
developed, maintained and operated by, and is a
service mark of, the American Stock Exchange (the
"AMEX"). The AMEX commenced the daily calculation
and public dissemination of the Index on
September 1, 1993.
The Index is being used by the Company with the
permission of the AMEX. The Index measures the
composite price performance of 30 selected stocks
trading on the Stock Exchange of Hong Kong Ltd.
(the "Hong Kong Stock Exchange" or "HKSE") and is
designed to represent a substantial segment of
the Hong Kong
S-3
<PAGE>
stock market. Business sector representation of
the component stocks comprising the Index (the
"Underlying Stocks") consists primarily of
property development, financing, utilities,
conglomerates, hotel/leisure, airlines,
transportation, property investment and
publishing. The Index was established on June 25,
1993, on which date the Index was set at a value
of 350.00.
As of February 2, 1996, the total capitalization
of the Underlying Stocks ranged from
approximately U.S.$551 million to a high of
U.S.$29.17 billion, with the median being
U.S.$4.49 billion.
Stocks that constitute the Index may be changed
or substituted by the AMEX based on certain
criteria. See "The Index" herein. The AMEX is
under no obligation to continue the calculation
and the dissemination of the Index. If the AMEX
or any third party discontinues publication of
the Index or any Successor Index, the Calculation
Agent shall determine for the remaining term of
the Notes the applicable Cash Settlement Value
based on the formula and method used in
calculating the Index in effect on the date the
Index or any Successor Index was last published.
See "Risk Factors" herein.
Risk Factors................ The Notes are subject to certain special
considerations. The Benchmark Index Value exceeds
the closing value of the Index on the date of
this Prospectus Supplement which was also the
date the Notes were priced by the Company for
individual sale to the public (the "Pricing
Date") by 14.67%. Investors should be aware that
if the Ending Index Value does not exceed the
closing Index value on the Pricing Date by more
than 14.67%, beneficial owners of the Notes will
receive only the principal amount thereof. A
beneficial owner of the Notes may receive no
Supplemental Redemption Amount at maturity, or a
Supplemental Redemption Amount that is below what
the Company would pay as interest as of the date
hereof if the Company issued non-callable senior
debt securities with a similar maturity as that
of the Notes. The return of principal of the
Notes at maturity and the payment of the
Supplemental Redemption Amount, if any, may not
reflect the full opportunity costs implied by
inflation or other factors relating to the time
value of money.
In no event will the Supplemental Redemption
Amount exceed $1,000 per $1,000 principal amount
of Notes. As a result, beneficial owners of Notes
will not benefit from Index increases in excess
of approximately 229% of the closing value of the
Index on the Pricing Date (the "Maximum Index
Value").
There is no precedent to indicate how the Notes
will trade in the secondary market or whether
such market will be liquid. It is expected that
the secondary market for the Notes will be
affected by the creditworthiness of the Company
and by a number of other factors. The trading
value of the Notes is expected to depend
S-4
<PAGE>
substantially on the extent of the appreciation,
if any, of the Index over the Benchmark Index
Value. See "The Index--Historical Data on the
Index" in this Prospectus Supplement for
historical values of the Index. If, however,
Notes are sold prior to the maturity date at a
time when the Index exceeds the Benchmark Index
Value, the sale price may be at a substantial
discount from the amount expected to be payable
to the beneficial owner if such excess of the
Index over the Benchmark Index Value were to
prevail until maturity of the Notes because of
the possible fluctuation of the Index between the
time of such sale and the time that the Ending
Index Value is determined. Furthermore, the price
at which a beneficial owner will be able to sell
Notes prior to maturity may be at a discount,
which could be substantial, from the principal
amount thereof, if, at such time the Index is
below, equal to or not sufficiently above the
Benchmark Index Value. The limitation that the
Supplemental Redemption Amount may not exceed
$1,000 per $1,000 principal amount of Notes may
adversely affect the secondary market value of
the Notes and such adverse effect could occur
even if the value of the Index is below the
Maximum Index Value. A discount could also result
from rising interest rates.
The Index does not reflect the payment of
dividends on the stocks underlying it and,
therefore, the yield based on the Index to the
maturity of the Notes will not produce the same
yield as if such underlying stocks were purchased
and held for a similar period. See "Risk Factors"
in this Prospectus Supplement.
The value of the Index and the Supplemental
Redemption Amount, if any, may be adversely
affected by foreign political, economic and other
developments. Since Underlying Stocks
representing approximately one-third of the
market capitalization of the Index (as of
December 29, 1995) are companies engaged in real
estate asset management, development, leasing,
property sales and other related activities,
factors affecting these real estate companies may
indirectly affect the Index. See "Risk Factors--
The Index" and "Risk Factors--Important
Considerations Relating to Hong Kong".
It is suggested that prospective investors who
consider purchasing the Notes should reach an
investment decision only after carefully
considering the suitability of the Notes in light
of their particular circumstances.
Investors should also consider the tax
consequences of investing in the Notes. See
"Certain United States Federal Income Tax
Considerations" in this Prospectus Supplement.
S-5
<PAGE>
RISK FACTORS
PAYMENT AT MATURITY
Benchmark Index Value will Exceed Value of Index on the Pricing Date. The
Benchmark Index Value exceeds the closing value of the Index on the Pricing
Date by 14.67%. Investors should be aware that if the Ending Index Value does
not exceed the closing value of the Index on the Pricing Date by more than
14.67%, beneficial owners of the Notes will receive only the principal amount
thereof.
Yield may be Below Market Interest Rates on the Pricing Date. A beneficial
owner of the Notes may receive no Supplemental Redemption Amount at maturity,
or a Supplemental Redemption Amount that is below what the Company would pay as
interest as of the Pricing Date if the Company issued non-callable senior debt
securities with a similar maturity as that of the Notes. The return of
principal of the Notes at maturity and the payment of the Supplemental
Redemption Amount, if any, may not reflect the full opportunity costs implied
by inflation or other factors relating to the time value of money.
Limitation of Supplemental Redemption Amount. Because the Supplemental
Redemption Amount will not exceed $1,000 per $1,000 principal amount of Notes,
beneficial owners of Notes will not benefit from Index increases in excess of
approximately 229% of the closing value of the Index on the Pricing Date (the
"Maximum Index Value"). In no event will the Supplemental Redemption Amount
exceed $1,000 per $1,000 principal amount of Notes.
Yield on Notes will not Reflect Dividends. The Index does not reflect the
payment of dividends on the stocks underlying it and therefore the yield based
on the Index to the maturity of the Notes will not produce the same yield as if
such underlying stocks were purchased and held for a similar period.
State Law Limit on Interest Paid. Because the Chemical Indenture provides
that the Notes will be governed by and construed in accordance with the laws of
New York, certain usury laws of New York State may apply. Under present New
York law, the maximum rate of interest is 25% per annum on a simple interest
basis. This limit may not apply to Notes in which $2,500,000 or more has been
invested. While the Company believes that New York law would be given effect by
a state or Federal court sitting outside of New York, state laws frequently
regulate the amount of interest that may be charged to and paid by a borrower
(including, in some cases, corporate borrowers). It is suggested that
prospective investors consult their personal advisors with respect to the
applicability of such laws. The Company will covenant for the benefit of the
Holders of the Notes, to the extent permitted by law, not to claim voluntarily
the benefits of any laws concerning usurious rates of interest against a Holder
of the Notes.
TRADING
The Notes have been approved for listing on the American Stock Exchange,
subject to official notice of issuance. There is no precedent to indicate how
the Notes will trade in the secondary market or whether such market will be
liquid. It is expected that the secondary market for the Notes will be affected
by the creditworthiness of the Company and by a number of other factors.
The trading value of the Notes is expected to depend substantially on the
extent of the appreciation, if any, of the Index over the Benchmark Index
Value. See "The Index--Historical Data on the Index" in this Prospectus
Supplement for historical values of the Index. If, however, Notes are sold
prior to the maturity date at a time when the Index exceeds the Benchmark Index
Value, the sale price may be at a substantial discount from the amount expected
to be payable to the beneficial owner if such excess of the Index over the
Benchmark Index Value were to prevail until maturity of the Notes because of
the possible fluctuation of the Index between the time of such sale and the
time that the Ending Index Value is determined. Furthermore, the price at which
a beneficial owner will be able to sell Notes prior to maturity may be at a
discount, which could be substantial, from the principal amount thereof, if, at
such time, the Index is below, equal to, or not sufficiently above the
Benchmark Index Value. The limitation that the Supplemental Redemption Amount
S-6
<PAGE>
will not exceed $1,000 per $1,000 principal amount of Notes may adversely
affect the secondary market value of the Notes and such adverse effect could
occur even if the value of the Index is below the Maximum Index Value. A
discount could also result from rising interest rates.
In addition to the value of the Index, the trading value of the Notes may be
affected by a number of interrelated factors, including the creditworthiness of
the Company and those factors listed below. The relationship among these
factors is complex, including how these factors affect the relative value of
the principal amount of the Notes to be repaid at maturity and the value of the
Supplemental Redemption Amount. Accordingly, investors should be aware that
factors other than the level of the Index are likely to affect the Notes'
trading value. The expected effect on the trading value of the Notes of each of
the factors listed below, assuming in each case that all other factors are held
constant, is as follows:
"Interest Rates." In general, if U.S. interest rates increase, the trading
value of the Notes is expected to decrease. If U.S. interest rates
decrease, the trading value of the Notes is expected to increase. If
interest rates in Hong Kong increase, the trading value of the Notes is
expected to increase; however, increased Hong Kong interest rates may
adversely affect the economy of Hong Kong and, in turn, the Index, and the
trading value of the Notes could then be expected to decrease. If interest
rates in Hong Kong decrease, the trading value of the Notes is expected to
decrease; however, decreased Hong Kong interest rates may favorably affect
the economy of Hong Kong and, in turn, the Index, and consequently, the
trading value of the Notes could then be expected to increase.
"Volatility of the Index." If the volatility of the Index increases, the
trading value of the Notes is expected to increase. If the volatility of
the Index decreases, the trading value of the Notes is expected to
decrease.
"Time Remaining to Maturity." The Notes may trade at a value above that
which may be inferred from the level of interest rates and the Index. This
difference will reflect a "time premium" due to expectations concerning the
value of the Index during the period prior to maturity of the Notes. As the
time remaining to maturity of the Notes decreases, however, this time
premium is expected to decrease, thus decreasing the trading value of the
Notes. In addition, the price at which a beneficial owner may be able to
sell Notes prior to maturity may be at a discount, which may be
substantial, from the principal amount of the Notes if the value of the
Index is below, equal to, or not sufficiently above the Benchmark Index
Value.
"Dividend Rates in Hong Kong." If dividend rates on the stocks comprising
the Index increase, the value of the Notes is expected to decrease.
Conversely, if dividend rates on the stocks comprising the Index decrease,
the value of the Notes is expected to increase. However, in general, rising
corporate dividend rates in Hong Kong may increase the value of the Index
and, in turn, increase the value of the Notes. Conversely, falling dividend
rates in Hong Kong may decrease the value of the Index and, in turn,
decrease the value of the Notes.
"Hong Kong Dollar/U.S. Dollar Exchange Rates." The Supplemental Redemption
Amount is based on a given level of the Index and will not be affected by
changes in the Hong Kong dollar/U.S. dollar exchange rate. However, a
number of economic factors, including the Hong Kong dollar/U.S. dollar
exchange rate, could affect the value of the Underlying Stocks and,
therefore, the value of the Index.
The impact of the factors specified above, excluding the value of the Index,
may offset, partially or in whole, any increase in the trading value of the
Notes that is attributable to an increase in the value of the Index. For
example, an increase in U.S. interest rates may cause the Notes to trade at a
discount from their initial offering price, even if the Index has appreciated
significantly. In general, assuming all relevant factors are held constant, the
effect on the trading value of the Notes of a given change in interest rates,
Index volatility and/or dividend rates of stocks comprising the Index is
expected to be less if it occurs later in the term of the Notes than if it
occurs earlier in the term of the Notes. The effect on the trading value of the
Notes of a given appreciation of the Index in excess of the Benchmark Index
Value is expected to be greater if it occurs later in the term of the Notes
than if it occurs earlier in the term of the Notes, assuming all other relevant
factors are held constant.
S-7
<PAGE>
THE INDEX
The stocks underlying the Index have been issued by companies organized in
Hong Kong. The prices of such Underlying Stocks will be affected by foreign
political, economic and other developments.
The Hong Kong Stock Exchange has adopted certain measures intended to prevent
any extreme short-term price fluctuations resulting from order imbalances or
market volatility. Where the Hong Kong Stock Exchange considers it necessary
for the protection of the investor or the maintenance of an orderly market, it
may at any time suspend dealings in any securities or cancel the listing of any
securities in such circumstances and subject to such conditions as it thinks
fit, whether requested by the listed issuer or not. The Hong Kong Stock
Exchange may also do so when: (1) an issuer fails, in a manner which the Hong
Kong Stock Exchange considers material, to comply with the Hong Kong Stock
Exchange Listing Rules or its Listing Agreements; or (2) the Hong Kong Stock
Exchange considers there are insufficient securities in the hands of the
public; or (3) the Hong Kong Stock Exchange considers that the listed issuer
does not have a sufficient level of operations or sufficient assets to warrant
the continued listing of the issuer's securities; or (4) the Hong Kong Stock
Exchange considers that the issuer or its business is no longer suitable for
listing. Investors should also be aware that the Hong Kong Stock Exchange may
suspend the trading of individual stocks in certain limited and extraordinary
circumstances, until certain price-sensitive information has been disclosed to
the public. Since the stocks underlying the Index are traded on the Hong Kong
Stock Exchange, changes in the Index may be affected by suspensions of trading
generally or of one or more of the stocks underlying the Index, which
limitations may, in turn, adversely affect the value of the Notes.
IMPORTANT CONSIDERATIONS RELATING TO HONG KONG
Investors should realize that the value of the Index, and therefore the
potential Supplemental Redemption Amount, if any, may be adversely affected by
political, economic or social instability, developments and changes in law or
regulations, particularly in Hong Kong and the People's Republic of China
("China"). Certain of these factors are discussed below.
In December 1984, Great Britain and China signed an agreement (the "Sino-
British Accord") under which Hong Kong will revert to Chinese sovereignty
effective July 1, 1997. Although China has committed by treaty to preserve for
50 years the economic and social freedoms currently enjoyed in Hong Kong, the
continuation of the economic system in Hong Kong after the reversion will be
affected by the Chinese government. Any increase in uncertainty as to the
future economic and political status of Hong Kong could have a material adverse
effect on the economy of Hong Kong and the Index.
The Sino-British Accord provides that the basic policies of China regarding
Hong Kong and the elaboration of these policies in the Sino-British Accord will
be stipulated by the National People's Congress of China in a Basic Law of the
Hong Kong Special Administrative Region (the "Hong Kong SAR") (the "Basic
Law"). The Basic Law was finalized in February 1990 and adopted by the National
People's Congress on April 4, 1990. The Basic Law provides that the Chief
Executive of the Hong Kong SAR will be recommended by a committee composed of
Hong Kong residents representing a broad spectrum of distinct constituencies,
such as industry, labor and the various professions, and appointed by the
government of China. The power of amendment of the Basic Law is vested in the
National People's Congress of China. The Basic Law provides that the Hong Kong
dollar will remain the legal tender in the Hong Kong SAR after the transfer of
sovereignty. It also provides that no exchange control policies will be applied
in the Hong Kong SAR and that the Hong Kong dollar will remain freely
convertible.
In the past, the prices of shares on the HKSE and Hong Kong property market
values have experienced substantial fluctuations in response to political
developments affecting China and relations between China and the United
Kingdom. Although China has agreed by treaty that the Hong Kong SAR will have a
high degree of legislative, legal and economic autonomy, there can be no
assurance as to the consequence of the exercise of Chinese sovereignty over
Hong Kong on the future economic and political status of Hong Kong and the
Index.
S-8
<PAGE>
It is not clear how future developments in Hong Kong and China may affect the
implementation of the Basic Law after the transfer of sovereignty in 1997. As a
result of this political and legal uncertainty, the economic prospects of Hong
Kong and the companies whose stocks comprise the Index are uncertain.
Accordingly, the Hong Kong Stock Exchange has been, and can be expected to
remain, highly volatile and sensitive to adverse political developments with
regard to Hong Kong's future and perceptions of actual or potential political
developments of that kind. For this reason, among others, the Index and the
value of the Notes can also be expected to be volatile.
"Underlying Stocks." The performance of certain companies listed on the Hong
Kong Stock Exchange is linked to the economic climate of China. Any downturn in
economic growth or other negative developments affecting the economic climate
of China could have a material adverse effect on the value of the Index. In
addition, the Hong Kong securities markets are currently characterized by a
high level of investment by and interest among United States and other non-Hong
Kong persons. Changes in the level of investment or interest could have a
material adverse effect on the level of the Index.
Although none of the companies whose stocks comprise the Underlying Stocks
are currently organized under the laws of China, the level of the Index
nonetheless can be affected by developments in China. China currently
indirectly influences political and economic developments in various parts of
Asia, including Hong Kong, and its influence is expected to continue to grow.
The government of China, a socialist state controlled by the Communist Party of
China, now permits private economic activities to a certain extent. Political,
economic or social instability in, and diplomatic and other developments
associated with, China could have a significant effect on economic conditions
in Hong Kong and on the market prices and liquidity of securities traded on the
Hong Kong Stock Exchange, including the Underlying Stocks. Moreover, many of
the issuers of the Underlying Stocks have substantial investments in China,
which investments could be adversely affected by political, economic, market
and other developments in or affecting China. Accordingly, adverse political or
economic developments in China could adversely affect the level of the Index
and thus the value of the Notes.
Underlying Stocks representing approximately one-third of the market
capitalization of the Index (as of December 29, 1995) are companies engaged in
real estate asset management, development, leasing, property sales and other
related activities. Many factors may have an adverse impact on the credit
quality of these real estate companies and, indirectly, the Index. Generally,
these include economic recession, the cyclical nature of real estate markets,
overbuilding, changing demographics, changes in governmental regulations
(including tax laws and environmental, building, zoning and sales regulations),
increases in real estate taxes or costs of material and labor, the inability to
secure performance guarantees or insurance as required, the unavailability of
investment capital and the inability to obtain construction financing or
mortgage loans at rates acceptable to builders and purchasers of real estate.
Additional risks include an inability to reduce expenditures associated with a
property (such as mortgage payments and property taxes) when rental revenue
declines, and possible loss upon foreclosure of mortgaged properties if
mortgage payments are not paid when due.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the Notes
should reach an investment decision only after carefully considering the
suitability of the Notes in light of their particular circumstances.
Investors should also consider the tax consequences of investing in the
Notes. See "Certain United States Federal Income Tax Considerations" in this
Prospectus Supplement.
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S") or its affiliates may from time to time engage in transactions
involving the Underlying Stocks for their proprietary accounts and for other
accounts under their management, which may influence the value of such
Underlying Stocks and therefore the value of the Notes. MLPF&S and its
affiliates will also be the counterparties to the hedge of the Company's
obligations under the Notes. See "Use of Proceeds" herein. Accordingly, under
certain
S-9
<PAGE>
circumstances, conflicts of interest may arise between MLPF&S's
responsibilities as Calculation Agent with respect to the Notes and its
obligations under its hedge and its status as a subsidiary of the Company.
Under certain circumstances, the duties of MLPF&S as Calculation Agent in
determining the existence of Market Disruption Events could conflict with the
interests of MLPF&S as an affiliate of the issuer of the Notes, Merrill Lynch
& Co., Inc., and with the interests of the holders of the Notes.
RECENT DEVELOPMENTS
The following summary of consolidated financial information was derived
from, and is qualified in its entirety by reference to, the financial
statements, condensed financial statements, and other information and data
contained in the Company's Annual Report on Form 10-K for the year ended
December 30, 1994, Quarterly Report on Form 10-Q for the period ended
September 29, 1995, as amended by Form 10-Q/A (Amendment No. 1), (the
"Quarterly Report") and Current Report on Form 8-K, dated January 22, 1996
(the "Current Report"). The Current Report, which includes preliminary
unaudited financial information for the year ended December 29, 1995, will be
superseded in its entirety by the Company's Annual Report on Form 10-K for the
year ended December 29, 1995. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus. The condensed consolidated
financial statements contained in the Quarterly Report are unaudited; however,
in the opinion of management of the Company, all adjustments (consisting only
of normal recurring accruals) necessary for a fair statement of the results of
operations have been included.
The Company conducts its business in highly volatile markets. Consequently,
the Company's results can be affected by many factors, including general
market conditions, the liquidity of secondary markets, the level and
volatility of interest rates and currency values, the valuation of securities
positions, competitive conditions, and the size, number, and timing of
transactions. In periods of unfavorable market activity, profitability can be
adversely affected because certain expenses remain relatively fixed. As a
result, net earnings and revenues can vary significantly from period to
period. Thus, interim results may not necessarily be representative of the
full year results of operations.
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------
DECEMBER 30, DECEMBER 29,
INCOME STATEMENT INFORMATION 1994 1995
- ---------------------------- ------------ ------------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C>
Revenues.............................................. $18,234 $21,513
Net revenues(1)....................................... $ 9,625 $10,265
Earnings before income taxes.......................... $ 1,730 $ 1,811
Net earnings.......................................... $ 1,017 $ 1,114
Ratio of earnings to fixed charges(2)................. 1.2 --
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 30, AT SEPTEMBER 29,
BALANCE SHEET INFORMATION(3) 1994 1995
- ---------------------------- -------------- --- ------------
(IN MILLIONS)
<S> <C> <C>
Total assets................................... $163,749 $185,473
Long-term borrowings........................... $ 14,863 $ 16,156
Stockholders' equity........................... $ 5,818 $ 6,077
</TABLE>
- --------
(1) Net revenues are revenues net of interest expense.
(2) The ratio of earnings to fixed charges for the year ended December 29,
1995 is not available as of the date of this Prospectus Supplement. The
ratio of earnings to fixed charges for the nine months ended September 29,
1995 was 1.2. For the purpose of calculating the ratio of earnings to
fixed charges, "earnings" consists of earnings from continuing operations
before income taxes and fixed charges. "Fixed charges" consists of
interest costs, amortization of debt expense, preferred stock dividend
requirements of majority-owned subsidiaries, and that portion of rentals
estimated to be representative of the interest factor.
(3) Balance Sheet information as of December 29, 1995 is not available as of
the date of this Prospectus Supplement. To finance its diverse activities,
the Company and certain of its subsidiaries borrow substantial amounts of
short-term funds on a regular basis. Although the amount of short-term
borrowings significantly varies with the level of general business
activity, on September 29, 1995, $1,476 million of bank loans and $16,048
million of commercial paper were outstanding. In addition, certain of the
Company's subsidiaries lend securities and enter into repurchase
agreements to obtain financing. At September 29, 1995, cash deposits for
securities loaned and securities sold under agreements to repurchase
amounted to $4,453 million and $54,274 million, respectively. From
September 30, 1995 to February 1, 1996, long-term borrowings, net of
repayments and repurchases, increased by approximately $2,459 million.
S-10
<PAGE>
FISCAL YEAR 1995
Global financial markets, which steadily weakened during most of 1994,
generally improved during 1995, led by a more stable U.S. economy, declining
interest rates, and heightened investor activity. Inflationary fears eased
throughout 1995 as key U.S. economic statistics indicated slow to moderate
growth. The Federal Reserve decreased short-term interest rates in July and
December following seven rate increases between February 1994 and February
1995. Investors reacted favorably to these events and were more active in stock
and bond markets during 1995. Net earnings for the 1995 fourth quarter were
$303 million, up 1% from the 1995 third quarter and up 88% from the 1994 fourth
quarter.
Net earnings for 1995 were $1,114 million, up 10% from 1994 net earnings of
$1,017 million. Earnings per common share were $5.44 primary and $5.42 fully
diluted in 1995, compared with $4.75 primary and $4.74 fully diluted in 1994.
Total revenues were a record $21,513 million, up 18% from 1994. Net revenues
(revenues after interest expense) totaled $10,265 million in 1995, up 7% from
1994.
Commission revenues increased 9% to a record $3,126 million from $2,871
million in 1994, due primarily to higher levels of listed and over-the-counter
securities transactions and mutual fund commissions, partially offset by lower
revenues from commodities. Commissions from listed and over-the-counter
securities increased due primarily to higher stock trading volumes, including
records on the New York Stock Exchange and Nasdaq. Mutual fund commissions
increased due primarily to higher distribution and redemption fees.
Distribution fees from deferred-charge funds increased due to strong fund sales
in prior periods and higher asset levels. Redemption fees increased as clients
repositioned invested assets.
Interest and dividend revenues increased 28% to $12,221 million from $9,578
million in 1994. Interest expense, which includes dividend expense, increased
31% from 1994 to $11,248 million. Net interest and dividend profit was $973
million, virtually unchanged from $969 million in 1994, as increases in net
interest-earning assets were offset by declining interest spreads due to the
flattening of the U.S. Treasury yield curve in 1995. The change in the yield
curve resulted from long-term interest rates falling more than short-term rates
during 1995.
Principal transactions revenues increased 8% from 1994 to $2,519 million in
1995. Increases in equities and equity derivatives and taxable fixed-income
trading revenues were partially offset by decreases in municipal securities,
foreign exchange and commodities, and interest rate and currency swaps trading
revenues. Taxable fixed-income trading revenues increased 10% to $516 million
due, in part, to higher revenues from corporate bonds and preferred stock, non-
U.S. government and agencies securities, and high-yield bonds. Trading revenues
from mortgage-backed products were negatively affected by reduced market
liquidity, leading to a loss. Net trading results from mortgage-backed products
were positive, however, when combined with related net interest profit. Trading
revenues in U.S. Government and agencies securities were down from 1994 due to
tighter spreads between U.S. Treasury securities and related futures hedges, as
well as reduced investor demand attributable to lower interest rates. Equities
and equity derivatives trading revenues, in the aggregate, increased 46% to
$912 million, due primarily to improved volumes in the convertible, over-the-
counter, and international equities markets, partially offset by lower equity
derivatives trading revenues. Interest rate and currency swaps revenues
declined 2% to $732 million. Decreases in U.S. dollar-denominated swap
transactions were substantially offset by increased revenues in non-dollar-
denominated swap transactions, particularly in Japanese and European markets.
Foreign exchange and commodities revenues, in the aggregate, declined 22% to
$86 million. Commodities trading revenues decreased due to lower volumes.
Increases in foreign exchange trading revenues resulted from higher customer
volume caused by the strengthening of the U.S. dollar versus other major
currencies during 1995. Municipal securities revenues decreased 28% to $273
million as a result of decreased investor demand for tax-exempt investments due
to potential tax law changes.
Investment banking revenues were $1,308 million, up 5% from $1,240 million in
1994. Strategic services revenues, which include fees for merger and
acquisition activity, debt restructuring, and other advisory
S-11
<PAGE>
services, increased, benefiting from record levels of announced merger and
acquisition deals in various industries. Underwriting revenues were down, as
lower revenues from equities, private placements, high yield debt, and
mortgage-backed securities underwriting were partially offset by increases in
corporate bonds and preferred stock and defined asset funds underwriting
revenues.
Asset management and portfolio service fees rose 9% in 1995 to a record
$1,890 million from $1,739 million in 1994, as a result of higher fees earned
from asset management and other fee-based services. Other revenues decreased 5%
from 1994 to $449 million, due to lower net realized investment gains in 1995
compared with 1994.
Non-interest expenses were $8,454 million, up 7% from $7,895 million in the
year-ago period. Compensation and benefits expense, which represented
approximately 62% of non-interest expenses, increased 6% due primarily to
increased production-related and incentive compensation and the addition of
Smith New Court PLC ("Smith New Court") employees. Compensation and benefits
expense as a percentage of net revenues was 51.3% in 1995, compared with 51.5%
in 1994.
Occupancy costs increased 3% from 1994 primarily due to international growth.
Other facilities-related costs, which include communications and equipment
rental expense and depreciation and amortization expense, rose 13% primarily
due to expanded use of market data services, as well as higher depreciation
expense from the purchase of technology-related assets over the past year.
Advertising and market development expenses increased 6% from 1994 as a
result of increased advertising, international travel, and sales promotion
primarily related to international growth. Professional fees increased 16% from
the year ago period, due to higher legal fees and systems development costs
related to upgrading technology and processing capabilities in trading, credit,
and customer systems. Brokerage, clearing, and exchange fees increased 7% as a
result of higher securities volume, particularly in international markets.
Other expenses increased 4% from 1994, due primarily to a $26 million first
quarter charge for the write-off of assets related to a technology contract and
$14 million of goodwill amortization related to Smith New Court.
Income tax expenses totaled $697 million in 1995. The effective tax rate in
1995 was 38.5%, compared with 41.2% in 1994. The decrease in the effective tax
rate was attributable to lower state income taxes, expanded international
business activities in jurisdictions with lower tax rates, and increases in
deductions for dividends received.
In 1995 the Company acquired Smith New Court, a U.K.-based global securities
firm, for approximately $800 million. The Company recorded approximately $550
million of goodwill related to the acquisition, which is being amortized on a
straight-line basis over 15 years. The Company's 1995 results include those of
Smith New Court since mid-August 1995.
CERTAIN BALANCE SHEET INFORMATION AS OF SEPTEMBER 29, 1995
Balance Sheet information as of December 29, 1995 is not available as of the
date of this Prospectus Supplement.
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers of, and the
liquidity of the market for, such securities, in addition to the usual risks
associated with investing in, financing, underwriting, and trading in
investment grade instruments.
S-12
<PAGE>
At September 29, 1995, the fair value of long and short non-investment grade
trading inventories amounted to $4,725 million and $406 million, respectively,
and in the aggregate (i.e. the sum of long and short trading inventories),
represented 5.1% of aggregate consolidated trading inventories.
At September 29, 1995, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $327 million
(excluding unutilized revolving lines of credit and other lending commitments
of $92 million), consisting primarily of senior term and subordinated
financings to 36 medium-sized corporations. At September 29, 1995, the Company
had no bridge loans outstanding. Loans to highly leveraged corporations are
carried at unpaid principal balances less a reserve for estimated losses. The
allowance for loan losses is estimated based on a review of each loan, and
consideration of economic, market, and credit conditions. Direct equity
investments made in conjunction with the Company's investment and merchant
banking activities aggregated $228 million at September 29, 1995, representing
investments in 81 enterprises. Equity investments in privately-held companies
for which sale is restricted by government or contractual requirements are
carried at the lower of cost or estimated net realizable value. At September
29, 1995, the Company held interests in partnerships, totaling $109 million
(recorded on the cost basis), that invest in highly leveraged transactions and
non-investment grade securities. At September 29, 1995, the Company also
committed to invest an additional $81 million in partnerships that invest in
leveraged transactions. As of November 13, 1995, the Company had additional
lending commitments for $520 million to non-investment grade counterparties or
related to highly leveraged transactions, of which $28 million had been drawn
upon.
The Company's insurance subsidiaries hold non-investment grade securities.
Non-investment grade securities were 3.7% of total insurance investments at
September 29, 1995. Non-investment grade securities of insurance subsidiaries
are classified as available-for-sale and are carried at fair value.
At September 29, 1995, the largest non-investment grade concentration
consisted of government and corporate obligations of a South American sovereign
totaling $503 million, of which $456 million represented on-balance-sheet
hedges for off-balance-sheet financial instruments. No one industry sector
accounted for more than 27% of total non-investment grade positions. At
September 29, 1995, the Company held an aggregate carrying value of $310
million in debt and equity securities of issuers in various stages of
bankruptcy proceedings or in default, of which 83% resulted from the Company's
market-making activities in such securities.
DESCRIPTION OF NOTES
GENERAL
The Notes are to be issued as a series of Senior Debt Securities under the
Senior Indenture, referred to as the "Chemical Indenture", which is more fully
described in the accompanying Prospectus. The Notes will mature on February 16,
1999.
While at maturity a beneficial owner of a Note will receive the principal
amount of such Note plus the Supplemental Redemption Amount, if any, there will
be no other payment of interest, periodic or otherwise. (See "Payment at
Maturity" below.)
The Notes are not subject to redemption by the Company or at the option of
any beneficial owner prior to maturity. Upon the occurrence of an Event of
Default with respect to the Notes, beneficial owners of the Notes may
accelerate the maturity of the Notes, as described under "Description of
Notes--Events of Default and Acceleration" in this Prospectus Supplement and
"Description of Debt Securities--General--Events of Default" in the
accompanying Prospectus.
The Notes are to be issued in denominations of $1,000 and integral multiples
thereof.
S-13
<PAGE>
PAYMENT AT MATURITY
At maturity, a beneficial owner of a Note will be entitled to receive the
principal amount thereof plus a Supplemental Redemption Amount, if any, all as
provided below. If the Ending Index Value of the Index does not exceed the
Benchmark Index Value a beneficial owner of a Note will be entitled to receive
only the principal amount thereof.
At maturity, a beneficial owner of a Note will be entitled to receive, with
respect to each such Note, (i) the principal amount thereof, and (ii) the
Supplemental Redemption Amount equal in amount to:
Ending Index Value--Benchmark Index Value
Principal Amount X -----------------------------------------
Benchmark Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero or more than $1,000 per $1,000 principal amount of Notes. The
Benchmark Index Value equals 664.83. The Benchmark Index Value was determined
on the Pricing Date by multiplying the Starting Index Value by a factor equal
to 115%. The Starting Index Value was determined by the Calculation Agent and
equaled the average (arithmetic mean) of the Computed Index Value as of 10:30
A.M., 11:00 A.M., 11:30 A.M., 12:00 Noon, 12:30 P.M., 2:30 P.M., 3:00 P.M. and
3:30 P.M. (Hong Kong time) on the Pricing Date. The "Computed Index Value" as
of any time means the number obtained by (i) multiplying the last reported
sales prices of each Underlying Stock at such time (as reported by Reuters
Information Services, Inc. with respect to intra-day prices and by The Stock
Exchange of Hong Kong Ltd. (the "Hong Kong Stock Exchange" or "HKSE") with
respect to official closing prices) by the number of shares outstanding (as
provided by the AMEX) to obtain the market capitalization for each of the
Underlying Stocks and (ii) dividing the aggregate market capitalization of all
the Underlying Stocks by the divisor used to calculate the last reported Index
(see "The Index" herein). The AMEX has confirmed that the methodology used by
the Calculation Agent to calculate the Computed Index Value is consistent with
that currently used by the AMEX to calculate the Index. The Ending Index Value
will be determined by Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Calculation Agent") and will equal the average (arithmetic mean) of the
closing values of the Index determined on each of the first five Calculation
Days during the Calculation Period. If there are fewer than five Calculation
Days, then the Ending Index Value will equal the average (arithmetic mean) of
the closing values of the Index on such Calculation Days, and if there is only
one Calculation Day, then the Ending Index Value will equal the closing value
of the Index on such Calculation Day. If no Calculation Days occur during the
Calculation Period because of Market Disruption Events, then the Ending Index
Value will equal the closing value of the Index determined on the last
scheduled Index Business Day in the Calculation Period, regardless of the
occurrences of a Market Disruption Event on such day. The "Calculation Period"
means the period from and including the seventh scheduled Index Business Day
prior to the maturity date to and including the second scheduled Index Business
Day prior to the maturity date. "Calculation Day" means any Index Business Day
during the Calculation Period on which a Market Disruption Event has not
occurred. For purposes of determining the Ending Index Value, an "Index
Business Day" is a day on which the Hong Kong Stock Exchange is open for
trading and the Index or any Successor Index is calculated and published. All
determinations made by the Calculation Agent shall be at the sole discretion of
the Calculation Agent and, absent a determination by the Calculation Agent of a
manifest error, shall be conclusive for all purposes and binding on the Company
and beneficial owners of the Notes.
S-14
<PAGE>
The following table illustrates, for a range of hypothetical Ending Index
Values, (i) the total amount payable at maturity for each $1,000 principal
amount of Notes, (ii) the pretax annualized rate of return to beneficial owners
of Notes, and (iii) the pretax annualized rate of return of an investment in
the stocks underlying the Index (which includes an assumed aggregate dividend
yield of 3.31% per annum, and no change in the U.S. dollar/Hong Kong dollar
exchange rate, as more fully described below).
<TABLE>
<CAPTION>
TOTAL PRETAX PRETAX ANNUALIZED
HYPOTHETICAL ENDING PERCENTAGE CHANGE AMOUNT ANNUALIZED RATE OF RATE OF RETURN OF
INDEX VALUE OF OVER THE STARTING PAYABLE AT RETURN ON THE STOCKS UNDERLYING THE
THE INDEX INDEX VALUE MATURITY NOTES(1) INDEX(1)(2)
------------------- ----------------- ---------- ------------------ ---------------------
<S> <C> <C> <C> <C>
289.06 -50% $1,000.00 0.00% -18.74%
346.87 -40% $1,000.00 0.00% -13.20%
404.68 -30% $1,000.00 0.00% -8.38%
462.49 -20% $1,000.00 0.00% -4.09%
520.30 -10% $1,000.00 0.00% -0.21%
578.11(3) 0% $1,000.00 0.00% 3.32%
635.92 10% $1,000.00 0.00% 6.58%
693.73 20% $1,043.47 1.41% 9.61%
751.54 30% $1,130.42 4.09% 12.43%
809.35 40% $1,217.38 6.61% 15.08%
867.17 50% $1,304.35 8.98% 17.59%
924.98 60% $1,391.30 11.22% 19.96%
982.79 70% $1,478.26 13.35% 22.21%
1,040.60 80% $1,565.21 15.38% 24.36%
1,098.41 90% $1,652.17 17.31% 26.41%
1,156.22 100% $1,739.12 19.16% 28.38%
1,214.03 110% $1,826.08 20.93% 30.26%
1,271.84 120% $1,913.03 22.64% 32.08%
1,329.65 130% $2,000.00 24.28% 33.83%
1,387.46 140% $2,000.00 24.28% 35.52%
1,445.28 150% $2,000.00 24.28% 37.15%
</TABLE>
- --------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the Index with the allocation of such amount reflecting
the relative weights of such stocks in the Index; (ii) a percentage change
in the aggregate price of such stocks that equals the percentage change in
the Index from the Starting Index Value to the relevant hypothetical Ending
Index Value; (iii) a constant dividend yield of 3.31% per annum, paid
quarterly from the date of initial delivery of Notes, applied to the value
of the Index at the end of each such quarter assuming such value increases
or decreases linearly from the Starting Index Value to the applicable
hypothetical Ending Index Value; (iv) no transaction fees or expenses; (v)
a term for the Notes from February 7, 1996 to February 16, 1996; (vi) a
final Index value equal to the Ending Index Value; and (vii) no change in
the U.S. dollar/Hong Kong dollar exchange rate. The aggregate dividend
yield of the stocks underlying the Index as of January 16, 1996 was
approximately 3.31%.
(3) The Starting Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the pretax annualized
rate of return resulting therefrom will depend entirely on the actual Ending
Index Value determined by the Calculation Agent as provided herein. Historical
data regarding the Index is included in this Prospectus Supplement under "The
Index--Historical Data on the Index".
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Index, or the value thereof, is
changed in any material respect, or if the Index is in any other way modified
so that such Index does not, in the opinion of the
S-15
<PAGE>
Calculation Agent, fairly represent the value of the Index had such changes or
modifications not been made, then, from and after such time, the Calculation
Agent shall, at the close of business in New York, New York, on each date that
the closing value with respect to the Ending Index Value is to be calculated,
make such adjustments as, in the good faith judgment of the Calculation Agent,
may be necessary in order to arrive at a calculation of a value of a stock
index comparable to the Index as if such changes or modifications had not been
made, and calculate such closing value with reference to the Index, as
adjusted. Accordingly, if the method of calculating the Index is modified so
that the value of such Index is a fraction or a multiple of what it would have
been if it had not been modified (e.g., due to a split in the Index), then the
Calculation Agent shall adjust such Index in order to arrive at a value of the
Index as if it had not been modified (e.g., as if such split had not occurred).
"Market Disruption Event" means either of the following events, as determined
by the Calculation Agent:
(i) a suspension or absence of trading on the HKSE of (a) 20% or more of
the Underlying Stocks and/or (b) the stocks of any three of the four most
highly capitalized companies included in the Underlying Stocks which then
comprise the Index or a Successor Index; or
(ii) the suspension or material limitation on the HK Futures Exchange or
any other major futures or securities market (which as of the date of this
Prospectus Supplement includes only the HK Futures Exchange, but which in
the Calculation Agent's judgment may change in the future) of trading in
futures or options contracts related to the Hang Seng Index, the Index or a
Successor Index.
The Hang Seng Index uses certain of the same securities in its calculation as
the Index (See "The Index--The Hong Kong Stock Exchange and the Hong Kong
Futures Exchange" herein). For purposes of determining whether a Market
Disruption Event has occurred: (1) a limitation on the hours or number of days
of trading will not constitute a Market Disruption Event if it results from an
announced change in the regular business hours of the relevant exchange, (2) a
decision to permanently discontinue trading in the relevant contract will not
constitute a Market Disruption Event, (3) a suspension of trading in a futures
or options contract on the Index by the AMEX or other major securities market
by reason of (x) a price change exceeding limits set by the AMEX or such
securities market, (y) an imbalance of orders relating to such contracts or (z)
a disparity in bid and ask quotes relating to such contracts will constitute a
suspension or material limitation of trading in futures or options contracts
related to the Index and (4) an "absence of trading" on the HKSE, HK Futures
Exchange or a major securities market on which futures or options contracts
related to the Index are traded will not include any time when the HKSE, HK
Futures Exchange or such securities market, as the case may be, itself is
closed for trading under ordinary circumstances.
DISCONTINUANCE OF THE INDEX
If the AMEX discontinues publication of the Index and the AMEX or another
entity publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to such Index (any such
index being referred to hereinafter as a "Successor Index"), then, upon the
Calculation Agent's notification of such determination to the Trustee and the
Company, the Calculation Agent will substitute the Successor Index as
calculated by the AMEX or such other entity for the Index and calculate the
Ending Index Value as described above under "Payment at Maturity". Upon any
selection by the Calculation Agent of a Successor Index, the Company shall
cause notice thereof to be given to Holders of the Notes.
If the AMEX discontinues publication of the Index and a Successor Index is
not selected by the Calculation Agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index for any such
Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the Calculation Agent for each Calculation
Day in accordance with the procedures last used to calculate the Index prior to
any such discontinuance. If a Successor Index is selected or the Calculation
Agent calculates a value as a substitute for the Index as described below, such
Successor
S-16
<PAGE>
Index or value shall be substituted for the Index for all purposes, including
for purposes of determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the Index prior to the period during
which the Supplemental Redemption Amount is to be determined and the
Calculation Agent determines that no Successor Index is available at such time,
then on each Business Day until the earlier to occur of (i) the determination
of the Ending Index Value and (ii) a determination by the Calculation Agent
that a Successor Index is available, the Calculation Agent shall determine the
value that would be used in computing the Supplemental Redemption Amount as
described in the preceding paragraph as if such day were a Calculation Day. The
Calculation Agent will cause notice of each such value to be published not less
often than once each month in The Wall Street Journal (or another newspaper of
general circulation), and arrange for information with respect to such values
to be made available by telephone. Notwithstanding these alternative
arrangements, discontinuance of the publication of the Index may adversely
affect trading in the Notes.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Notes shall have occurred and
be continuing, the amount payable to a beneficial owner of a Note upon any
acceleration permitted by the Notes, with respect to each $1,000 principal
amount thereof, will be equal to: (i) the initial issue price ($1,000), plus
(ii) an additional amount of contingent interest calculated as though the date
of early repayment were the maturity date of the Notes. See "Description of
Notes--Payment at Maturity" in this Prospectus Supplement. If a bankruptcy
proceeding is commenced in respect of the Company, the claim of the beneficial
owner of a Note may be limited, under Section 502(b)(2) of Title 11 of the
United States Code, to the principal amount of the Note plus an additional
amount of contingent interest calculated as though the date of the commencement
of the proceeding were the maturity date of the Notes.
In case of default in payment at the maturity date of the Notes (whether at
their stated maturity or upon acceleration), from and after the maturity date
the Notes shall bear interest, payable upon demand of the beneficial owners
thereof, at the rate of 5.40% per annum (to the extent that payment of such
interest shall be legally enforceable) on the unpaid amount due and payable on
such date in accordance with the terms of the Notes to the date payment of such
amount has been made or duly provided for.
DEPOSITORY
Upon issuance, all Notes will be represented by one or more fully registered
global securities (the "Global Notes"). Each such Global Note will be deposited
with, or on behalf of, The Depository Trust Company ("DTC"), as Depository,
registered in the name of DTC or a nominee thereof. Unless and until it is
exchanged in whole or in part for Notes in definitive form, no Global Note may
be transferred except as a whole by the Depository to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any such nominee to a
successor of such Depository or a nominee of such successor.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities of its participants
("Participants") and to facilitate the clearance and settlement of securities
transactions among its Participants in such securities through electronic book-
entry changes in accounts of the Participants, thereby eliminating the need for
physical movement of securities certificates. DTC's Participants include
securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations.
DTC is owned by a number of Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC book-entry
S-17
<PAGE>
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Purchases of Notes must be made by or through Participants, which will
receive a credit on the records of DTC. The ownership interest of each actual
purchaser of each Note ("Beneficial Owner") is in turn to be recorded on the
Participants' or Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Participant or Indirect Participant through which the Beneficial Owner entered
into the transaction. Ownership of beneficial interests in such Global Note
will be shown on, and the transfer of such ownership interests will be effected
only through, records maintained by DTC (with respect to interests of
Participants) and on the records of Participants (with respect to interests of
persons held through Participants). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge beneficial interests in Global Notes.
"So long as DTC, or its nominee, is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or Holder
of the Notes represented by such Global Note for all purposes under the
Chemical Indenture. Except as provided below, Beneficial Owners in a Global
Note will not be entitled to have the Notes represented by such Global Notes
registered in their names, will not receive or be entitled to receive physical
delivery of the Notes in definitive form and will not be considered the owners
or Holders thereof under the Chemical Indenture, including for purposes of
receiving any reports delivered by the Company or the Trustee pursuant to the
Chemical Indenture. Accordingly, each Person owning a beneficial interest in a
Global Note must rely on the procedures of DTC and, if such Person is not a
Participant, on the procedures of the Participant through which such Person
owns its interest, to exercise any rights of a Holder under the Chemical
Indenture. The Company understands that under existing industry practices, in
the event that the Company requests any action of Holders or that an owner of a
beneficial interest in such a Global Note desires to give or take any action
which a Holder is entitled to give or take under the Chemical Indenture, DTC
would authorize the Participants holding the relevant beneficial interests to
give or take such action, and such Participants would authorize Beneficial
Owners owning through such Participants to give or take such action or would
otherwise act upon the instructions of Beneficial Owners. Conveyance of notices
and other communications by DTC to Participants, by Participants to Indirect
Participants, and by Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time."
Payment of the principal of, and any Supplemental Redemption Amount with
respect to, Notes registered in the name of DTC or its nominee will be made to
DTC or its nominee, as the case may be, as the Holder of the Global Notes
representing such Notes. None of the Company, the Trustee or any other agent of
the Company or agent of the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests or for supervising or reviewing any records
relating to such beneficial ownership interests. The Company expects that DTC,
upon receipt of any payment of principal or any Supplemental Redemption Amount
in respect of a Global Note, will credit the accounts of the Participants with
payment in amounts proportionate to their respective holdings in principal
amount of beneficial interest in such Global Note as shown on the records of
DTC. The Company also expects that payments by Participants to Beneficial
Owners will be governed by standing customer instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participants.
If (x) any Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Company within 60
days, (y) the Company executes and delivers to the Trustee a Company Order to
the effect that the Global Notes shall be exchangeable or (z) an Event of
Default has occurred and is continuing with respect to the Notes, the Global
Notes will be exchangeable for Notes in definitive form of like tenor and of an
equal aggregate principal amount, in denominations of $1,000 and
S-18
<PAGE>
integral multiples thereof. Such definitive Notes shall be registered in such
name or names as the Depository shall instruct the Trustee. It is expected that
such instructions may be based upon directions received by the Depository from
Participants with respect to ownership of beneficial interests in such Global
Notes.
THE INDEX
THE INDEX
Unless otherwise stated, all information herein on the Index is derived from
the AMEX or other publicly available sources. Such information reflects the
policies of the AMEX as stated in such sources and such policies are subject to
change by the AMEX.
The Index is a capitalization-weighted stock index designed, developed,
maintained and operated by, and is a service mark of, the AMEX that measures
the market value performance (share price times the number of shares
outstanding) of selected Hong Kong Stock Exchange listed stocks. The Index
currently is based on the capitalization of 30 Underlying Stocks trading on the
Hong Kong Stock Exchange and is designed to represent a substantial segment of
the Hong Kong stock market. The Hong Kong Stock Exchange is the primary trading
market for most of the 30 Underlying Stocks. The primary trading market for all
of the Underlying Stocks is either Hong Kong or London. Business sector
representation of the Underlying Stocks comprising the Index as of February 2,
1996 was as follows: property development (33.36%), financing (21.80%),
conglomerates (18.68%), utilities (18.01%) and also includes hotel/leisure
(4.33%), airlines (2.24%), property investment (0.85%), transportation (0.46%)
and publishing (0.24%). The Index was established on June 25, 1993. (See the
table below for a list of the Underlying Stocks as of February 2, 1996.) As of
February 2, 1996, the five largest Underlying Stocks accounted for
approximately 48.53% of the market capitalization of the Index, with the
largest being HSBC Holdings plc (12.30%), followed by Hutchison Whampoa Ltd.
(9.80%), Sun Hung Kai Properties Ltd. (9.45%), Hong Kong Telecommunications
Ltd. (9.10%) and Hang Seng Bank Ltd. (7.88%). The lowest weighted Underlying
Stock, as of February 2, 1996, was Tai Chung (Holdings) Ltd. (0.23%).
The Index will be maintained by the AMEX and will contain at least 30
Underlying Stocks at all times. In addition, the Underlying Stocks must meet
certain listing and maintenance standards as discussed below. The AMEX may
change the composition of the Index at any time in order to more accurately
reflect the composition and track the movement of the Hong Kong stock market.
Any replacement Underlying Stock must also meet the Underlying Stock listing
and maintenance standards as discussed below. Further, the AMEX may replace
Underlying Stocks in the event of certain corporate events, such as takeovers,
or mergers, that change the nature of the security.
The AMEX will select Underlying Stocks on the basis of their market weight,
trading liquidity, and representation of the business industries reflected on
the Hong Kong Stock Exchange. The AMEX will require that each Underlying Stock
be one issued by an entity with major business interests in Hong Kong, listed
for trading on the Hong Kong Stock Exchange, and have its primary trading
market located in a country with which the AMEX has an effective surveillance
sharing agreement. The AMEX will remove any Underlying Stock failing to meet
the above listing and maintenance criteria within 30 days after such failure
occurs. In order to ensure that the Index does not contain a large number of
thinly-capitalized, low-priced securities with small public floats and low
trading volumes, the AMEX has also established additional qualification
criteria for the inclusion and maintenance of Underlying Stocks, based on the
following standards: (1) all Underlying Stocks selected for inclusion in the
Index must have and thereafter maintain, an average daily capitalization, as
calculated by the total number of shares outstanding times the latest price per
share (in Hong Kong dollars), measured over the prior 6-month period, of at
least H.K.$3,000,000,000 (approximately U.S.$388,000,000 on the date hereof);
(2) all Underlying Stocks selected for inclusion in the Index must have, and
thereafter maintain, an average daily closing price, measured over the prior 6-
month period, not lower than H.K.$2.50 (approximately U.S.$0.32 on the date
hereof); (3) all Underlying Stocks selected for inclusion in the Index must
have, and thereafter maintain an average daily trading volume,
S-19
<PAGE>
measured over the prior 6-month period, of more than 1,000,000 shares per day,
although up to, but no more than, three Underlying Stocks may have an average
daily trading volume, measured over the prior 6-month period, of less than
1,000,000 shares per day, but in no event less than 500,000 shares per day; and
(4) all Underlying Stocks selected for inclusion in the Index must have, and
thereafter maintain, a minimum "free float" value (total freely tradeable
outstanding shares minus insider holdings), based on a monthly average measured
over the prior 3-month period, of U.S.$238,000,000, although up to, but no more
than, three Underlying Stocks may have a free float value of less than
U.S.$238,000,000 but in no event less than U.S.$150,000,000, measured over the
same period. The AMEX will review and apply the above qualification criteria
relating to the Underlying Stocks on a quarterly basis, conducted the last
business day in January, April, July, and October. Any Underlying Stock failing
to meet the above listing and maintenance criteria will be reviewed on the
second Friday of the second month following the quarterly review to again
determine compliance with the above criteria. Any Underlying Stock failing this
second review will be replaced by a "qualified" Underlying Stock effective upon
the close of business on the following Friday, provided however, that if such
Friday is not a day on which the AMEX is open for trading, the replacement will
be effective at the close of business on the first preceding day on which the
AMEX is open for trading. For example, if an Underlying Stock was found to be
below the maintenance criteria on Wednesday, January 31, 1996, it would be
reviewed again on March 8 and, if ineligible, would be replaced by a qualified
security at the close of business on March 15, 1996. If March 15 happens not to
be a day on which the AMEX is open for trading, the replacement will be
effective at the close of business on the preceding Thursday, March 14, 1996,
assuming that Thursday is a day on which the AMEX is open for trading. The AMEX
will notify its membership immediately after it determines to replace an
Underlying Stock.
The annual reports and prospectuses of the companies listed on the Hong Kong
Stock Exchange are available for investors' inspection in the City Hall Library
(a public library in Central Hong Kong). The Hong Kong Stock Exchange library
also has information for each listed company but it is available only to
members of the Hong Kong Stock Exchange.
A company whose stock is included in the Index is not required to be
incorporated under the laws of Hong Kong.
The Index is a capitalization-weighted index. A company's market
capitalization is calculated by multiplying the number of shares outstanding by
the company's current share price (in Hong Kong dollars). For valuation
purposes unrelated to the Notes, one Index unit (1.0) is assigned a fixed value
of one U.S. dollar. The Index measures the average change in prices of the
Underlying Stocks, weighted according to their respective market
capitalizations, so that the effect of a percentage price change in an
Underlying Stock will be greater the larger the Underlying Stock's market
capitalization. The Index was established by the AMEX on June 25, 1993, on
which date the Index value was set at 350.00. The daily calculation and public
dissemination by the AMEX of the Index commenced on September 1, 1993. The data
relating to the Index was back-calculated by the AMEX from January 2, 1989 to
August 31, 1993. The Index is calculated by (i) adding the market
capitalization of each Underlying Stock and (ii) dividing such sum by an
adjusted base market capitalization or divisor. On June 25, 1993, the market
value of the Underlying Stocks was approximately H.K.$1,152,829,149,500
(equivalent to approximately U.S.$148,656,241,000 based on the exchange rate as
of such date) and the divisor used to calculate the Index was 3,293,797,570.
The AMEX selected that particular divisor number in order, among other things,
to ensure that the Index was set at a general price level consistent with other
well recognized stock markets. The divisor is subject to periodic adjustments
as set forth below. The Index is calculated once every Index Calculation Day by
the AMEX based on the most recent official closing prices of each of the
Underlying Stocks reported by the Hong Kong Stock Exchange. Pricing of the
Index will be performed each day and be disseminated before the opening of
trading via the Consolidated Tape Authority Network-B continuously during each
day on which the AMEX is open for trading. The dissemination value, however,
will remain the same throughout the trading day because the trading hours of
the Hong Kong Stock Exchange do not overlap with AMEX trading hours.
Accordingly, updated price information for the Underlying Stocks will be
unavailable.
S-20
<PAGE>
In order to maintain continuity in the level of the Index in the event of
certain changes due to non-market factors affecting the Underlying Stocks, such
as the addition or deletion of stocks, substitution of stock, stock dividends,
stock splits, distributions of assets to stockholders or other capitalization
events, the divisor used in calculating the Index is adjusted in a manner
designed to prevent any instantaneous change or discontinuity in the level of
the Index and in order that the value of the Index immediately after such
change will equal the level of the Index immediately prior to the change.
Thereafter, the divisor remains at the new value until a further adjustment is
necessary as the result of another change. Nevertheless, changes in the
identities and characteristics of the Underlying Stocks may significantly
affect the behavior of the Index over time.
The AMEX is under no obligation to continue the calculation and dissemination
of the Index and the method by which the Index is calculated and the name "The
AMEX Hong Kong 30 Index" may be changed at the discretion of the AMEX. The
Notes are not sponsored, endorsed, sold or promoted by the AMEX. No inference
should be drawn from the information contained in this Prospectus Supplement
that the AMEX makes any representation or warranty, implied or express, to the
Company, the beneficial owners of Notes or any member of the public regarding
the advisability of investing in securities generally or in the Notes in
particular or the ability of the Index to track general stock market
performance. The AMEX has no obligation to take the needs of the Company or the
beneficial owners of Notes into consideration in determining, composing or
calculating the Index. The AMEX is not responsible for, and has not
participated in the determination of the timing of prices for or quantities of,
the Notes to be issued or in the determination or calculation of the equation
by which the Supplemental Redemption Amount is determined. The AMEX has no
obligation or liability in connection with the administration, marketing or
trading of the Notes.
The use of and reference to the Index in connection with the Notes have been
consented to by the AMEX.
Except with respect to the responsibility of the Calculation Agent to make
certain calculations under certain circumstances as described herein, none of
the Company, the Trustee, the Calculation Agent or the Underwriter accepts any
responsibility for the calculation, maintenance or publication of the Index or
any Successor Index. The AMEX disclaims all responsibility for any inaccuracies
in the data on which the Index is based, or any mistakes or errors or omissions
in the calculations or dissemination of the Index or for the manner in which
such index is applied in determining the Supplemental Redemption Amount, if
any.
S-21
<PAGE>
The following table presents pertinent market information for each of the
component stocks in the Index as of February 2, 1996. As of such date, the
total capitalization of the component stocks of the Index was approximately
U.S.$238.32 billion. Market capitalizations of the individual stocks in the
Index ranged from approximately U.S.$551 million to a high of U.S.$29.17
billion, with the median being U.S.$4.49 billion.
<TABLE>
<CAPTION>
INDEX
COMPANY NAME INDUSTRY WEIGHT*
------------ -------- -------
<S> <C> <C>
HSBC HOLDINGS PLC. ................................ Finance 12.30%
HUTCHISON WHAMPOA LTD. ............................ Conglomerates 9.80%
SUN HUNG KAI PROPERTIES LTD. ...................... Property Development 9.45%
HONG KONG TELECOMMUNICATIONS LTD. ................. Utilities 9.10%
HANG SENG BANK LTD. ............................... Finance 7.88%
CHEUNG KONG HOLDINGS LTD. ......................... Property Development 6.83%
HENDERSON LAND DEVELOPMENT CO. LTD. ............... Property Development 5.11%
CHINA LIGHT AND POWER CO. LTD. .................... Utilities 4.06%
SWIRE PACIFIC LTD "A'. ............................ Conglomerates 3.65%
WHARF HOLDINGS LTD. ............................... Hotels/Leisure 3.63%
NEW WORLD DEVELOPMENT CO. LTD. .................... Property Development 3.59%
CITIC PACIFIC LTD. ................................ Conglomerates 3.41%
HONG KONG ELECTRIC HOLDINGS LTD. .................. Utilities 2.90%
CATHAY PACIFIC AIRWAYS LTD. ....................... Airlines 2.24%
HONG KONG AND CHINA GAS CO. LTD. .................. Utilities 1.95%
WHEELOCK AND COMPANY LTD. ......................... Conglomerates 1.82%
BANK OF EAST ASIA LTD. ............................ Finance 1.62%
HYSAN DEVELOPMENT CO. LTD. ........................ Property Development 1.32%
AMOY PROPERTIES.................................... Property Development 1.29%
HOPEWELL HOLDINGS LTD. ............................ Property Development 1.26%
SINO LAND COMPANY LTD. ............................ Property Development 1.14%
HANG LUNG DEVELOPMENT CO. LTD. .................... Property Development 1.12%
HENDERSON INVESTMENT LTD. ......................... Property Development 1.03%
HONG KONG AND SHANGHAI HOTELS LTD. ................ Hotel/Leisure 0.70%
CHINESE ESTATES HOLDINGS. ......................... Property Development 0.63%
GUANGDONG INVESTMENT. ............................. Property Investment 0.62%
GREAT EAGLE HOLDINGS LTD. ......................... Property Development 0.59%
SHUN TAK HOLDINGS. ................................ Transportation 0.46%
ORIENTAL PRESS GROUP .............................. Publisher 0.24%
TAI CHEUNG (HOLDINGS) LTD. ........................ Property Investment 0.23%
</TABLE>
- --------
* The sum of Index Weight percentages may be less than 100% due to rounding.
HISTORICAL DATA ON THE INDEX
The following table sets forth the level of the Index at the end of each
month, in the period from January 1, 1989 through January 31, 1996. All
historical data presented in the following table relating to periods before
September 1, 1993 (the date the AMEX commenced the daily calculation and public
dissemination of the Index) were calculated by the AMEX and are presented as if
the Index had existed during such periods, based on the Underlying Stocks
contained in the Index as of June 25, 1993, and such closing levels have been
calculated hypothetically on the same basis that the Index is calculated. All
historical data presented in the following table relating to periods after
September 1, 1993 are based on actual data from the Index. These historical
data on the Index are not necessarily indicative of the future performance of
the Index or what the value of the Notes may be. Any historical upward or
downward trend in the level of the Index during any period set forth below is
not any indication that the Index is more or less likely to increase or
decrease at any time during the term of the Notes.
S-22
<PAGE>
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1989:
January......................................................... 149.88
February........................................................ 147.27
March........................................................... 146.46
April........................................................... 152.01
May............................................................. 133.76
June............................................................ 110.46
July............................................................ 125.78
August.......................................................... 123.02
September....................................................... 135.71
October......................................................... 135.04
November........................................................ 136.23
December........................................................ 140.32
1990:
January......................................................... 136.29
February........................................................ 146.44
March........................................................... 149.57
April........................................................... 146.77
May............................................................. 156.58
June............................................................ 164.36
July............................................................ 172.48
August.......................................................... 154.24
September....................................................... 137.78
October......................................................... 149.74
November........................................................ 148.38
December........................................................ 151.46
1991:
January......................................................... 162.42
February........................................................ 177.56
March........................................................... 187.39
April........................................................... 179.85
May............................................................. 186.43
June............................................................ 184.68
July............................................................ 201.91
August.......................................................... 201.49
September....................................................... 200.42
October......................................................... 204.76
November........................................................ 209.96
December........................................................ 217.58
1992:
January......................................................... 233.06
February........................................................ 250.01
March........................................................... 249.71
April........................................................... 271.89
May............................................................. 308.30
June............................................................ 309.67
July............................................................ 296.24
August.......................................................... 282.96
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1992:
September....................................................... 276.67
October......................................................... 311.14
November........................................................ 291.86
December........................................................ 276.73
1993:
January......................................................... 287.74
February........................................................ 318.99
March........................................................... 319.68
April........................................................... 341.75
May............................................................. 369.20
June............................................................ 354.06
July............................................................ 348.06
August.......................................................... 374.08
September....................................................... 382.05
October......................................................... 467.64
November........................................................ 458.93
December........................................................ 598.98
1994:
January......................................................... 576.69
February........................................................ 519.77
March........................................................... 452.60
April........................................................... 449.25
May............................................................. 479.28
June............................................................ 437.47
July............................................................ 474.92
August.......................................................... 499.22
September....................................................... 479.69
October......................................................... 485.14
November........................................................ 424.51
December........................................................ 412.70
1995:
January......................................................... 369.57
February........................................................ 421.35
March........................................................... 435.22
April........................................................... 421.62
May............................................................. 475.92
June............................................................ 465.60
July............................................................ 477.39
August.......................................................... 462.52
September....................................................... 486.91
October......................................................... 492.85
November........................................................ 494.12
December........................................................ 507.26
1996:
January......................................................... 574.55
</TABLE>
S-24
<PAGE>
The following graph sets forth the historical performance of the Index at the
end of each month from January 1989 through January 1996. Past movements of the
Index are not necessarily indicative of the future Index values. On February 2,
1996 the closing level of the Index was 579.79.
[The graph sets forth the historical month-end closing levels of the Index from
January 1989 through December 1995, with the vertical axis specifying the
month-end closing level in a range from 0 to 620 in increments of 20 and the
horizontal axis specifying the time period in increments of three months from
January 1989 trough December 1995.]
Source: Prepared by the Company from data obtained from the AMEX.
THE HONG KONG STOCK EXCHANGE AND THE HONG KONG FUTURES EXCHANGE
As of September 29, 1995, the Hong Kong Stock Exchange was the world's ninth
largest stock exchange based on U.S. dollar market capitalization. There are no
market-makers in Hong Kong, but exchange dealers may act as dual capacity
broker-dealers. All of the Underlying Stocks of the Index are traded through
the computerized trading system. Trading is undertaken from 10:00 A.M. to 12:30
P.M. and then from 2:30 P.M. to 3:55 P.M. (Hong Kong time) every Hong Kong day
except Saturdays, Sundays and other days on which the Hong Kong Stock Exchange
is closed. Hong Kong time is 12 hours ahead of Eastern Daylight Savings Time
and 13 hours ahead of Eastern Standard Time. Settlement of trades is required
within 48 hours and is conducted by electronic book-entry delivery through the
Central Clearing and Settlement System.
Due to the time differences between New York City and Hong Kong, on any
normal trading day, trading on the Hong Kong Stock Exchange of the Underlying
Stocks currently will cease at 2:55 A.M. or 3:55 A.M., New York City time.
Using the last reported closing prices of the Underlying Stocks on the Hong
Kong Stock Exchange, the level of the Index on any such trading day generally
will be calculated, published and disseminated by the AMEX in the United States
shortly prior to the opening of trading on the AMEX in New York on the same
calendar day.
The Hong Kong Stock Exchange has adopted certain measures intended to prevent
any extreme short-term price fluctuations resulting from order imbalances or
market volatility. Where the Hong Kong Stock Exchange considers it necessary
for the protection of the investor or the maintenance of an orderly market, it
S-25
<PAGE>
may at any time suspend dealings in any securities or cancel the listing of any
securities in such circumstances and subject to such conditions as it thinks
fit, whether requested by the listed issuer or not. The Hong Kong Stock
Exchange may also do so where: (1) an issuer fails, in a manner which the Hong
Kong Stock Exchange considers material, to comply with the Hong Kong Stock
Exchange Listing Rules or its Listing Agreements; or (2) the Hong Kong Stock
Exchange considers there are insufficient securities in the hands of the
public; or (3) the Hong Kong Stock Exchange considers that the listed issuer
does not have a sufficient level of operations or sufficient assets to warrant
the continued listing of the issuer's securities; or (4) the Hong Kong Stock
Exchange considers that the issuer or its business is no longer suitable for
listing. Investors should also be aware that the Hong Kong Stock Exchange may
suspend the trading of individual stocks in certain limited and extraordinary
circumstances, until certain price-sensitive information has been disclosed to
the public. For instance, dealing on a listed company's shares will normally be
suspended when information about an intention to make a private placing, or a
very substantial transaction compared to the net asset value of the company,
has been leaked through an improper channel. Trading will not be resumed until
after a formal announcement has been made. Trading of a company's shares may
also be suspended if there is unusual trading activity in that stock.
An issuer may apply for suspension on its own accord. A suspension request
will normally only be acceded to in the following circumstances: (1) where, for
a reason acceptable to the Hong Kong Stock Exchange, price-sensitive
information cannot at that time be disclosed; (2) where the issuer is subject
to an offer, but only where terms have been agreed in principle and require
discussion with, and agreement by, one or more major shareholders (suspensions
will only normally be appropriate where no previous announcement has been
made); (3) to maintain an orderly market; (4) where there is an occurrence of
certain levels of notifiable transactions, such as substantial changes in the
nature, control or structure of the issuer, where publication of full details
is necessary to permit a realistic valuation to be made of the securities
concerned, or the approval of shareholders is required; (5) where the issuer is
no longer suitable for listing, or becomes a "cash" company; or (6) for issuers
going into receivership or liquidation.
As a result of the foregoing, variations in the Index may be limited by
suspension of trading of individual stocks which comprise the Index which may
in turn, adversely affect the value of the Notes. In addition, a partial or
total halt in trading of all of the Underlying Stocks could result in a Market
Disruption Event. See "Description of Notes--Adjustments to the Index; Market
Disruption Events" herein.
Because the Index uses certain of the same securities in its calculation as
the Hang Seng Index ("HSI"), another stock index, the HSI is referenced to
determine if a Market Disruption Event has occurred. A Market Disruption Event
can occur if there is a suspension or material limitation on the HK Futures
Exchange of trading in futures or options contracts related to the HSI. The
stock index contracts traded on the HK Futures Exchange are based upon the HSI
and its four sub-indices: properties, utilities, finance, and commerce and
industry. The HSI is a value-weighted index of 33 stocks and every stock in the
HSI is represented in one of the four sub-indices. The following Underlying
Stocks of the Index (as of December 29, 1995) are not constituent securities of
the HSI: Chinese Estates Holdings, Henderson Investment Ltd. and Tai Cheung
(Holdings) Ltd. The following constituent securities of the HSI (as of December
29, 1995) are not Underlying Stocks of the Index: Hong Kong Aircraft Eng. Co.
Ltd., Johnson Electric Holdings Ltd., Mirmar Hotel and Inv. Co. Ltd., Shangri-
La Asia Ltd., South China Morning Post (Holdings) Ltd. and Television
Broadcasts Ltd. The Index also differs from the HSI in that, among other
things, the selection, maintenance and replacement criteria for the constituent
securities of the two indices are not the same and that they are operated and
governed by the rules of different entities.
Currently, the contracts listed on the HK Futures Exchange are HSI futures,
HSI sub-indices futures, HSI options, gold and Hong Kong Interbank Offered Rate
futures. There is a daily maximum fluctuation limit of 300 points imposed on
the HSI contracts (not applicable to spot mark contracts). Once the limit is
touched, orders cannot be transacted above (the outside limit) or below (the
downside limit) but orders within the range can continue to trade.
S-26
<PAGE>
The foregoing discussion reflects the current rules governing the Hong Kong
Stock Exchange and the HK Futures Exchange, which are subject to change.
The HK Futures Exchange takes no responsibility for the contents of this
document, makes no representations as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising
from or in reliance upon the whole or any part of the contents of this
document. The HK Futures Exchange has made no assessment of, nor taken any
responsibility for, the financial soundness of the Company or the merits of
investing in the Notes, nor have they verified the accuracy or the truthfulness
of statements made or opinions expressed in this document.
"Hong Kong Futures Exchange" and "HK Futures Exchange" are trademarks of the
Hong Kong Futures Exchange Ltd.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth in full below is the opinion of Brown & Wood, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the Notes. Such opinion is based upon
laws, regulations, rulings and decisions now in effect (or, in the case of
certain regulations, in proposed form), all of which are subject to change
(including retroactive changes in effective dates) or possible differing
interpretations. The discussion below deals only with Notes held as capital
assets and does not purport to deal with persons in special tax situations,
such as financial institutions, insurance companies, regulated investment
companies, dealers in securities or currencies, tax-exempt entities, or persons
holding Notes as a hedge against currency risks or as a position in a
"straddle" for tax purposes. It also does not deal with holders other than
original purchasers (except where otherwise specifically noted herein). The
following discussion also assumes that the issue price of the Notes, as
determined for United States Federal income tax purposes, equals the principal
amount thereof. Persons considering the purchase of the Notes should consult
their own tax advisors concerning the application of the United Stated Federal
income tax laws to their particular situations as well as any consequences of
the purchase, ownership and disposition of the Notes arising under the laws of
any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
GENERAL
There are no statutory provisions, regulations (except possibly the Proposed
Regulations as described below), published rulings or judicial decisions
addressing or involving the characterization, for United States Federal income
tax purposes, of the Notes or securities with terms substantially the same as
the Notes. However, although the matter is not free from doubt, under current
law, each Note should be treated as a debt instrument of the Company for United
States Federal income tax purposes. The Company currently intends to treat each
Note as a debt instrument of the Company for United States Federal income tax
purposes and, where required, intends to file information returns with the
Internal Revenue Service ("IRS") in accordance with such treatment, in the
absence of any change or clarification in the law, by regulation or otherwise,
requiring a different characterization of the Notes. Prospective investors in
the Notes should be aware, however, that the IRS is not bound by the Company's
characterization of the Notes as indebtedness and the IRS could possibly take a
different position as to the proper characterization of the Notes for United
States Federal income tax purposes. The following discussion of the principal
United States Federal income tax consequences of the purchase, ownership and
disposition of the Notes is based upon the assumption that
S-27
<PAGE>
each Note will be treated as a debt instrument of the Company for United
States Federal income tax purposes. If the Notes are not in fact treated as
debt instruments of the Company for United States Federal income tax purposes,
then the United States Federal income tax treatment of the purchase, ownership
and disposition of the Notes could differ from the treatment discussed below
with the result that the timing and character of income, gain or loss
recognized in respect of a Note could differ from the timing and character of
income, gain or loss recognized in respect of a Note had the Notes in fact
been treated as debt instruments of the Company for United States Federal
income tax purposes.
U.S. HOLDERS
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument generally will be taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or
are received (in accordance with the U.S. Holder's regular method of tax
accounting). Under these principles, the amount payable at maturity with
respect to a Note in excess of the principal amount thereof (i.e., the
Supplemental Redemption Amount), if any, would be treated as contingent
interest and generally would be includible in income by a U.S. Holder as
ordinary interest on the date the Supplemental Redemption Amount is accrued
(i.e., generally when the Supplemental Redemption Amount becomes fixed in
amount and becomes unconditionally payable) or when such amount is received
(in accordance with the U.S. Holder's regular method of tax accounting). In
addition, if the amount payable at maturity with respect to a Note exceeds the
principal amount thereof, then such Note would be treated as having been
retired at maturity in exchange for an amount equal to the principal amount
thereof.
Upon the sale, exchange or retirement of a Note, a U.S. Holder generally
would recognize taxable gain or loss in an amount equal to the difference, if
any, between the amount realized on the sale, exchange or retirement and such
U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note. Such gain or loss generally should be capital gain or loss and
should be long-term capital gain or loss if the Note were held by the U.S.
Holder for more than one year (subject to the market discount rules, as
discussed below). It is possible, however, that the IRS could assert that any
amounts realized upon the sale or exchange of a Note prior to its maturity in
excess of the principal amount thereof constitutes ordinary interest income
(subject to the bond premium rules, as discussed below). Nonetheless, although
the matter is not free from doubt, under current law, any gain realized upon
the sale or exchange of a Note prior to its maturity should be treated
entirely as capital gain (subject to the market discount rules, as discussed
below).
Prospective investors in the Notes should be aware that on December 16,
1994, the Treasury Department issued proposed regulations (the "Proposed
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments such as the Notes. The Proposed
Regulations, however, are proposed to apply only to debt instruments issued 60
days or more after the date on which the Proposed Regulations are published as
final Treasury regulations. Accordingly, if ultimately adopted in their
current form, the Proposed Regulations would not apply to the Notes.
Furthermore, proposed Treasury regulations are not binding upon either the IRS
or taxpayers prior to becoming effective as temporary or final regulations. In
general, if ultimately adopted in their current form, the Proposed Regulations
would cause the timing and character of income, gain or loss reported on a
contingent payment debt instrument to substantially differ from the timing and
character of income, gain or loss reported on a contingent payment debt
instrument under general principles of current United States Federal income
tax law (as described above). Specifically, the Proposed Regulations generally
would require a U.S. Holder of such an instrument to include future contingent
interest payments in income as such interest accrues based upon a projected
payment schedule. Moreover, in general, under the Proposed Regulations, any
gain recognized by a U.S. Holder on the sale, exchange, or retirement of a
contingent payment debt instrument such as the Notes would be treated as
ordinary income and a portion of any loss realized could be treated as
ordinary loss as opposed to capital loss (depending upon the circumstances).
Prospective investors in the Notes are urged to consult their own tax advisers
concerning the effect, if any, of the Proposed Regulations on their investment
in the Notes.
S-28
<PAGE>
The Company, where required, currently intends to file information returns
with the IRS treating each Note as a debt instrument of the Company for United
States Federal income tax purposes (as discussed above) and reporting
contingent interest on, if any, and gross proceeds received upon the sale,
exchange or retirement of each Note in accordance with general principles of
current United States Federal income tax law (as described above), in the
absence of any change or clarification in the law, by regulation or otherwise
requiring a different treatment.
MARKET DISCOUNT AND PREMIUM
If a U.S. Holder purchases a Note for an amount that is less than the Note's
issue price (i.e., the Note's stated principal amount), the amount of the
difference will be treated as "market discount," unless such difference is
less than a specified de minimis amount (generally 1/4 of 1% of the Note's
stated redemption price at maturity (defined below) multiplied by the number
of complete years to maturity from the date the U.S. Holder purchased such
Note).
Under the market discount rules, a U.S. Holder will be required to treat any
gain realized on the sale, exchange, retirement or other disposition of a Note
as ordinary income to the extent of the lesser of (i) the amount of such
realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time
of such disposition. Market discount will be considered to accrue ratably
during the period from the date of acquisition to the Note's maturity, unless
the U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the Note's maturity or
certain earlier dispositions of the Note, because a current deduction is only
allowed to the extent the interest expense exceeds an allocable portion of
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and regarding the deferral of
interest deductions will not apply. Generally, such currently included market
discount is treated as ordinary interest for United States Federal income tax
purposes and a U.S. Holder would increase its tax basis in the Note by the
amount of any such currently included market discount. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the
first day of the first taxable year to which such election applies and may be
revoked only with the consent of the IRS.
If a U.S. Holder purchases a Note for an amount that is greater than its
stated redemption price at maturity (i.e., the Note's stated principal
amount), such U.S. Holder will be considered to have purchased the Note with
"amortizable bond premium" equal in amount to such excess. A U.S. Holder may
elect to amortize such premium using a constant yield method over the
remaining term of the Note and may offset interest otherwise required to be
included in respect of the Note during any taxable year by the amortized
amount of such excess for the taxable year. A U.S. Holder generally will
reduce its tax basis in the Note by the amount of any interest offset taken.
Such election, if made, would apply to all debt instruments held by the U.S.
Holder at the beginning of the first taxable year to which such election
applies and to all debt instruments acquired by such U.S. Holder thereafter.
Such election would also be irrevocable once made, unless the U.S. Holder
making such an election obtains the express consent of the IRS to revoke such
election.
ORIGINAL ISSUE DISCOUNT
Prospective investors in the Notes should be aware that if the principal
amount of a Note exceeds the issue price of the Note, as determined for United
States Federal income tax purposes, by more than a specified de minimis amount
(generally 1/4 of 1% of the principal amount of the Note multiplied by the
number of complete years from the Note's issue date to its maturity date),
then such Note will be treated as having been issued with original issue
discount. If a significant percentage of the total aggregate amount of the
Notes originally issued is sold at a discount from the principal amount
thereof (e.g. pursuant to the discounts noted
S-29
<PAGE>
on the cover of this Prospectus Supplement), then the issue price of the Notes,
as determined for United States Federal income tax purposes, may be less than
the principal amount of the Notes and the Notes may be issued with original
issue discount. In general, a U.S. Holder of a Note issued with original issue
discount would be required to include such original issue discount into income
as ordinary interest over the entire term of the Note using a constant yield
method. A U.S. Holder would increase such U.S. Holder's tax basis in a Note by
any original issue discount included in income by such U.S. Holder.
Nevertheless, if a U.S. Holder purchases a Note issued with original issue
discount for an amount equal to the principal amount thereof, such U.S. Holder
would not be required to include any such original issue discount into income.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended. However,
income allocable to non-U.S. Holders will generally be subject to annual tax
reporting on IRS Form 1042S. For a non-U.S. Holder to qualify for the exemption
from taxation, the last United States payor in the chain of payment prior to
payment to a non-U.S. Holder (the "Withholding Agent") must have received in
the year in which a payment of interest or principal occurs, or in either of
the two preceding calendar years, a statement that (i) is signed by the
beneficial owner of the Note under penalties of perjury, (ii) certifies that
such owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made on an IRS Form W-8 or a
substantially similar form, and the beneficial owner must inform the
Withholding Agent of any change in the information on the statement within 30
days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
Under current law, a Note will not be includible in the estate of a non-U.S.
Holder unless the individual is a direct or indirect 10% or greater shareholder
of the Company or, at the time of such individual's death, payments in respect
of such Note would have been effectively connected with the conduct by such
individual of a trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt
S-30
<PAGE>
recipient or (ii) the seller provides, in the required manner, certain
identifying information and, in the case of a non-U.S. Holder, certifies that
such seller is a non-U.S. Holder (and certain other conditions are met). Such a
sale must also be reported by the broker to the IRS, unless either (i) the
broker determines that the seller is an exempt recipient or (ii) the seller
certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status would be made normally
on an IRS Form W-8 under penalties of perjury, although in certain cases it may
be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used as described under
"Use of Proceeds" in the attached Prospectus and to hedge market risks of the
Company affecting the value of the Supplemental Redemption Amount.
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter") has
agreed, subject to the terms and conditions of the Underwriting Agreement and a
Terms Agreement, to purchase from the Company $45,000,000 aggregate principal
amount of Notes. The Underwriting Agreement provides that the obligations of
the Underwriter are subject to certain conditions precedent and that the
Underwriter will be obligated to purchase all of the Notes if any are
purchased.
The Underwriter has advised the Company that it proposes initially to offer
all or part of the Notes directly to the public at the offering prices set
forth on the cover page of this Prospectus Supplement and to certain dealers at
such prices less a concession not in excess of 1.5% of the principal amount of
the Notes. After the initial public offering, the public offering price and
concession may be changed.
The underwriting of the Notes will conform to the requirements set forth in
the applicable sections of Schedule E to the By-Laws of the National
Association of Securities Dealers, Inc.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company and for the
Underwriter by Brown & Wood, New York, New York.
S-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL
UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... S-3
Risk Factors............................................................... S-6
Recent Developments........................................................ S-10
Description of Notes....................................................... S-13
The Index.................................................................. S-19
Certain United States Federal Income Tax Considerations.................... S-27
Use of Proceeds............................................................ S-31
Underwriting............................................................... S-31
Validity of Notes.......................................................... S-31
PROSPECTUS
</TABLE>
<TABLE>
<S> <C>
Available Information....................................................... 2
Incorporation of Certain Documents by Reference............................. 2
Merrill Lynch & Co., Inc. .................................................. 3
Use of Proceeds............................................................. 3
Summary Financial Information............................................... 4
Description of Debt Securities.............................................. 8
Description of Debt Warrants................................................ 12
Description of Currency Warrants............................................ 13
Description of Index Warrants............................................... 14
Plan of Distribution........................................................ 19
Experts..................................................................... 19
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO]
$45,000,000
MERRILL LYNCH & CO., INC.
AMEX HONG KONG 30 INDEX*
EQUITY PARTICIPATION NOTES DUE
FEBRUARY 16, 1999
----------------------
PROSPECTUS SUPPLEMENT
----------------------
MERRILL LYNCH & CO.
FEBRUARY 2, 1996
*The "AMEX Hong Kong 30 Index" is a service mark of the American Stock
Exchange.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
